SL Green (SLG) Down 3.4% Since Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for SL Green Realty Corporation (NYSE:SLG) . Shares have lost about 3.4% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

SL Green Q2 FFO Beats Estimates, Revenues Decline

SL Green reported second-quarter 2017 FFO of $1.78 per share, ahead of the Zacks Consensus Estimate of $1.62. The figure came in lower than the prior-year quarter’s FFO per share of $3.39.

Notably, second-quarter 2017 FFO per share figure included 9 cents per share of prior unrecognized income on the company's preferred equity investment in 885 Third Avenue as well as 10 cents per share of net fees associated with the closure of the One Vanderbilt joint venture. On the other hand, the year-ago quarter FFO per share number included $1.77 per share of income related to 388-390 Greenwich Street that was sold in that very quarter.

However, rental revenues of $279.4 million in the reported quarter missed the Zacks Consensus Estimate of $281.4 million. In addition, the figure plunged 33.0% on a year-over-year basis.

Quarter in Detail

For the quarter, same-store cash net operating income (NOI), including the share of same-store cash NOI from unconsolidated joint ventures, edged down 0.5% year over year. Notably, consolidated property same-store cash NOI descended 2.0%. Results reflect the impact of expected tenant move-outs at some of its properties. However, the company reaffirmed its full-year 2017 same store cash NOI guidance range of 2.0–3.0%.

In the Manhattan portfolio, SL Green inked 45 office leases for 314,399 square feet of space. As of Jun 30, 2017, Manhattan same-store occupancy, inclusive of leases signed but not yet commenced, was 94.9%, down 80 basis points from the end of the prior quarter. Importantly, in the second quarter, the mark-to-market on signed Manhattan office leases was 13.2% higher over the previous fully escalated rents on the same spaces.

On the other hand, in the Suburban portfolio, SL Green signed 21 office lease deals for 159,581 square feet of space. Same-store occupancy for the Suburban portfolio, inclusive of leases signed but not yet commenced, was 85.1% as of Jun 30, 2017, up 50 bps from the end of the prior quarter. Moreover, in the quarter under review, mark-to-market on signed Suburban office leases was 7.1% higher than the previously fully escalated rents on the same spaces.

SL Green exited the quarter with cash and cash equivalents of nearly $271.0 million, down from $279.4 million at the end of 2016. During the second quarter, SL Green repurchased 2.4 million shares of common stock under its previously announced $1.0 billion share repurchase plan. The shares were bought back at an average price of $103.41 per share.

Additionally, the company originated new debt and preferred equity investments aggregating $431.0 million in the reported quarter, of which $369.8 million was retained at a yield of 10.2%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. There has been one revision higher for the current quarter compared to three lower. While looking back an additional 30 days, we can see even more downside. There have been two moves higher compared to five lower in the last two months.

SL Green Realty Corporation Price and Consensus

VGM Scores

At this time, SL Green's stock has a subpar Growth Score of D, however its Momentum is doing a lot better with an A. The stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for momentum investors based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.